Do Organizations of the Future Really Need a Chief Digital Officer?

Charging a single person with executing a digital strategy for the future could be a step in the wrong direction.

As you struggle with how to respond to digital disruption—the wave of new products, services, philosophies, complexities, and relationships brought about by new digital technologies—you may be tempted to try a new idea. You may be thinking that what you need to meet these new conditions is a role with a new title, such as Chief Digital Officer (CDO). If so, you may be wrong.

The notion of a central management group for innovation —- such as a CDO or Chief Innovation Officer -— has some merit. Such a leadership role can articulate a vision, and a strategy to get there. But once that vision is articulated, is a centralized structure really the best way to achieve it?

Arjun Sethi, A.T. Kearney

Digital failures are often caused by organizational misalignment. And part of the problem is that a centralized team can struggle to drive the day-to-day execution of product innovation. After all, a CDO doesn’t own the products. The CDO owns the vision —- a vision that could quickly become outdated given the speed and unpredictability of these changes.

Think about it: digital disruption will force a formerly slow, conservative, top-down industry to become more nimble and customer-focused. Should that transformation be managed by new top-down structures, with a single individual charged with changing behaviors throughout the organization?

Or, if you’re promoting a culture of flexible innovation, should you use a more flexible organization? Hub-and-spoke structures can encourage more active co-creation between product teams and customers. You may still want an innovation Center of Excellence to identify, encourage, and disseminate good ideas. But it’s risky to hope that such a Center would generate and incubate those ideas.

A few months ago John Finch, the Chief Information Officer (CIO) of the Bank of England, was quoted in Computerworld as saying the bank didn’t need a CDO to drive digital transformation. You can read the story as a turf battle: is digital transformation the responsibility of CIOs or CDOs? But I think Finch’s more important implications center on where this transformation takes place. Computerworld writes, “He said that he believes that the CIO should be responsible for ‘triggering the innovation debates’ about how this digital transformation takes place, ensuring that the network and technology capacity is available, whilst being aware of the security and compliance requirements.” Triggering debates and ensuring capacity are far different than executing projects.

What would this look like on the ground? Consider the central European bank Zuno. Zuno is a digital-only, low-fee, “alternative” bank (slogan: Less Bank, More Life). It also happens to be a subsidiary of Raiffeisen Bank International, the largest banking group in Austria. Raiffeisen, rather than setting up alternative centralized structures, incubated the smaller Zuno to reach a new market segment.

Banks considering implementing a CDO role should be commended for seeking to respond to change. They understand that digital disruption is happening, and they want their organizations to be ready. But as they consider their path to this uncertain future, they might ponder: how often are such goals achieved with a magic bullet? If you’re trying to solve for your organization’s ability to respond to change, can you really do it by renaming some boxes on the same old organizational charts?

I like to call the current transformation digital disruption because it’s not just technologies that are changing, but relationships. Empowered consumers, big-data startup partners, nimble competitors, new services and revenue streams and marketing vectors—all of these forces are in play. You could try to hire an incredibly talented central figure to stay on top of all of them. But you might be better off fostering a well-coordinated team with responsibilities dispersed to those close to the situation they’re monitoring.

Arjun Sethi is a partner with A.T. Kearney, where he leads the Strategic IT Practice for the Americas. He can be reached at Arjun.Sethi@atkearney.com.

re: Do Organizations of the Future Really Need a Chief Digital Officer?

Centralizing that function into a single role will help in governing between the two entities, but where that person reports into will determine how effectively new ideas can be brought to market. That role should report into someone with the authority to prioritize development workload and resources.

re: Do Organizations of the Future Really Need a Chief Digital Officer?

I think that the interaction between the bank and the innovation team does need to be centralized in a single role though. It would help in governing the interaction between the two entities, ensuring that the bank gets what it needs in terms of innovation while acting as a shield against the bureaucracy that you mention.

re: Do Organizations of the Future Really Need a Chief Digital Officer?

Yes the divide between the "maintenance" work of IT and the innovation work needs to be more clearly defined now, and I think that can be divided along the lines of a digital or innovation officer and a technology or ops officer. If those functions are put under the umbrella of the same executive then you risk the maintenance tasks overwhelming the need for innovation.

re: Do Organizations of the Future Really Need a Chief Digital Officer?

Perhaps it's not that organizations need a CDO in addition to a CIO, but that the CDO is a more accurate description of what the CIO does at this point. Especially given the fact that there are already often CTOs who are responsible for things like IT infrastructure and architecture.

re: Do Organizations of the Future Really Need a Chief Digital Officer?

Banks have a lot riding on the digital future yet as you point out they are clinging to traditional centralized organizations. How can they compete with more nimble players and companies that attract talent with all-night hackathons?While banks and other financial services firms are used to centralized structures, maybe they need to allow small groups to foster innovation. As you say, they could assign someone to an alternative unit and foster innovation at a grass roots level. Your example of an alternative all-digital bank that is a sub of a large traditional bank is interesting. It reminds me of ING which established Orange as a new brand. By dispersing talent to these units, they may be better off than naming a chief digital officer.